Using financial records to keep score
Fresh out of college, I started working for a large company that staffed an army of sales people. Each one of us was ranked against the other and we’d compete in friendly (and sometimes unfriendly) ways to reach the top. The top producers got all kinds of perks: bonuses, vacations, even bragging rights. Those on the bottom of the ranking were either cut loose or motivated to strive harder.
It really was all about rankings. There’s the famous phrase “what gets measured gets managed”, which is true. Our rankings were based on a handful of factors and we focused on those factors because they helped us to climb in the rankings.
Some might say it was “cut-throat” motivation but that company certainly squeezed out every drop of performance from us. And I still attribute plenty of my success today to the skills and focus I learned there. Even though it seemed cold-hearted, there just might be a place for this in the small business world.
I wonder if entrepreneurs would be more successful if their financials were ranked against others.
The initial inspiration of this post came from a blog on the Go San Angelo website called “Financial statement keep score in business.”
Blog writer David Erickson is a Certified Business Advisor at the Angelo State University Small Business Development Center. He touched on the idea of financial statements keeping score. If you read his article, you’ll find that he covers the main financial statements in similar way to what we’ve covered here. But he hints at something far greater: Your financial statements could be – SHOULD be! – ways that you rank your own small business performance.
Obviously, you wouldn’t rank it against other entrepreneurs but you should rank your performance against your historical performance. Why not look at your P&L statement for each quarter and see how this quarter stacks up against previous quarters. Are you doing well? Are you struggling? If you do this over a period of years, you might find that certain quarters are good for you and others are not so good. Or, you can narrow to an even more granular level: the monthly statement.
Remember: what gets measured gets managed. So, if you want to manage your profitability, you should be measuring it regularly!
Jessica Routier, IAC-EZ
Jessica Routier
Jessica wants to talk to you! She is who coordinates the contests, travels to all the conferences, and interfaces on a fun level with customers on a daily basis in order to bring our users together as a community.
Jessica has a B.Admin and an MBA. Her background in business, along with a diverse skill-set (including a diploma in Medical Transportation, retail experience, and experience as a paralegal) make her a valued, highly flexible team member.
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